The FTSEurofirst 300 Index provisionally closed higher by 11.08 points at 1171.66. European shares extended their gains in early afternoon tarding on Thursday buoyed by investor sentiment in the U.S. as the Dow Jones Index opened close to near all-time high levels.

On Wednesday, Fed Chief Ben Bernanke reiterated the central bank's commitment to an easy monetary policy, telling Congress that the central bank's easy monetary policy was helping the country's economy. As the so-called "sequester" looms on Friday, when $85 billion worth of automatic budget cuts are due, Bernanke warned Congress against letting the cuts take place.

In economic releases on Thursday, Spain released its fourth quarter gross domestic product (GDP) figures at 8 a.m. London time. The Spanish economy shrank 0.8 percent on a quarterly basis, its fastest pace of decline since mid-2009.

Banks were in focus on Thursday, with shares in Spain's rescued Bankia closing 4.7 percent higher provisionally, despite the bank posting a net loss of 19.2 billion euros ($25.2 billion) for 2012. Bankia said it was in a solid position to return to profit, after writing down more than 22 billion euros ($29 billion) of soured loans.

However, shares in part-nationalized RBS (Royal Bank of Scotland) closed 6.46 percent lower provisionally after the bank posted an operating profit of 3.5 billion pounds ($5.24 billion) for 2012, its highest since its bailout in 2008. Non-operating items weighed on annual profits, including 1.1 billion pounds in provisions for PPI redress, and 1.6 billion in restructuring costs.

RBS said it was moving closer to being in a position for the government to start selling its 82 percent stake, but some analysts disagreed.

"RBS as institution remains an unfathomable distance from rehabilitation," said Michael Symonds, a credit research analyst at Daiwa Capital Markets, in a note on Thursday.

"Abundant financial - and political – hurdles still confront the bank. This not only includes unknown recurrent costs for customer redress, but also lingering concerns over longer-term asset quality should the UK economy remain moribund and, most immediately, regulatory capital pressure."

Meanwhile, Reuters reported that Barclays plans to cut or claw back about 450 million pounds ($680 million) of pay from its staff, after a rate-rigging scandal that last year forced out its chief executive and chairman. Barclays closed over 2 percent higher on Thursday.

"We think the results are a useful reminder that Ahold has a strong balance sheet and good cash generation but that structural/competitive challenges in its core US business will continue to pressure margins," wrote Deutsche Bank analysts James Collins and Sally Ronald in a research note on Thursday.

Shares in U.K.-based company IAG (International Airlines Group), the owner of British Airways and Iberia, closed more than 7 percent higher after it swung to a full-year operating loss, but said it would press ahead with slashing 3,800 jobs.

Shares in copper miner Kazakhmys plummeted around 8.5 percent after it warned it could be forced to take an estimated $1.5 billion hit on its holding in Kazakh rival ENRC.

Rio Tinto reported on Thursday it has appointed Chris Lynch as chief financial officer to succeed Guy Elliott. Lynch will receive a base salary of 800,000 pounds ($1.2 billion). Shares in the company closed flat at 3541 points provisionally.